Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2017 ONFSCDRS 25
Appeal P15-00065
OFFICE OF THE DIRECTOR OF ARBITRATIONS
RAJANI PARARAJASINGAM
Appellant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Respondent
BEFORE:
David Evans
REPRESENTATIVES:
Shahen Alexanian for Ms. Pararajasingam
Mari Maimets for State Farm Mutual Automobile Insurance Company
HEARING DATE:
May 17, 2016
APPEAL ORDER
Under section 283 of the Insurance Act, R.S.O. 1990 c. I.8 as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Regulation 664, R.R.O. 1990, as amended, it is ordered that:
The appeal of the Arbitrator’s order dated October 30, 2015, is allowed. Paragraph 1 thereof is rescinded and replaced with the following:
Ms. Rajani Pararajasingam’s Application for Arbitration is not dismissed as statute barred and she may proceed to arbitration.
If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.
February 2, 2017
David Evans Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
Ms. Pararajasingam failed to attend mediation. The Report of Mediator confirmed that the prescribed or agreed time for mediation of the issues in dispute had expired, no settlement had been reached, and mediation had failed. Ms. Pararajasingam needed a failed Report of Mediator in order to proceed to arbitration regarding her dispute with her insurer, State Farm Mutual Automobile Insurance Company, as otherwise the time limit for arbitration had expired.
The Arbitrator found that the Mediator should have reported that mediation did not take place because the Mediator could not have formed an opinion that arbitration failed in the absence of Ms. Pararajasingam. Accordingly, with no failed Report of Mediator, Ms. Pararajasingam’s Application for Arbitation was out of time.
However, the Insurance Act provides that mediation may fail not only when a mediator forms the opinion that it has failed but also, in the alternative, when the prescribed or agreed time for mediation has expired.
I find the Arbitrator erred because the Report of Mediator fulfilled the preconditions for filing for arbitration, in that the agreed time for mediation had expired, so mediation had failed, and accordingly Ms. Pararajasingam is not precluded from proceeding to arbitration.
II. BACKGROUND
The motion decision under appeal relates to whether or not a Report of Mediator was mistakenly issued. If it was, as the Arbitrator found, then Ms. Pararajasingam missed the limitation period in s. 281.1 of the Act for filing for arbitration.
To put the following narrative in context, note that the first step after a dispute arises with an insurer is to seek mediation within two years of the denial of a benefit. The parties can then agree to extend the time for mediation beyond the prescribed time of 60 days from the filing for mediation. After the mediator issues a report that mediation has failed, the insured can file for arbitration within 90 days of the report, even if the normal two-year time limit for filing for arbitration in s. 281.1 of the Act has passed.
Ms. Pararajasingam was injured in an accident on July 13, 2010, and applied for accident benefits from her insurer, State Farm, pursuant to the 2010 SABS.1 A dispute arose when State Farm terminated benefits on December 22, 2010, pursuant to s. 53 of the SABS, claiming wilful misrepresentation of material facts with respect to the application.
Ms. Pararajasingam wished to dispute the denial, so she had to first seek mediation. The mediation process is set out in s. 280 of the Act: apply for the prompt appointment of a mediator, attempt to settle the dispute with the mediator’s assistance, and get a report of failed mediation if the mediator thinks mediation will fail or the prescribed or agreed time for mediation passes.
On August 23, 2012, Ms. Pararajasingam filed her Application for Mediation, which was less than two years after the denial.
However, mediation was not completed within the 60 days required by the Act and its associated Regulation. As discussed in Cornie v. Security National Insurance Co. (c.o.b. TD Meloche
Monnex), 2012 ONCA 837, s. 10 of the regulations2 requires a mediator to attempt to effect a settlement of a dispute within 60 days after the date on which the application for the appointment of a mediator is filed. This is the prescribed time for mediation. Nonetheless, the parties may extend the time for the completion of the mediation process by agreement, pursuant to s. 280(5), even if the time for completion has expired. This is the agreed time for mediation.
The parties agreed to extend the time for mediation to July 4, 2013.
This is important for the limitation period issue, since the two-year time limit for commencing arbitration would otherwise have expired on December 22, 2012 pursuant to s. 281.1(1). That time limit is extended if mediation fails and the mediator reports it under s. 280(8): s. 281.1(2)(b) provides that, despite the two-year limitation period in s. 281.1(1), an arbitration proceeding may be commenced within 90 days after the report of failed mediation.
Ms. Pararajasingam was not present on the agreed date, so the mediation was rescheduled to August 15, 2013. The Appellant was again not present on the rescheduled mediation date.
The Insurer requested the mediation be cancelled and not deemed failed. Subsection 280(7) defines when mediation fails: “Mediation has failed when the mediator has given notice to the parties that in his or her opinion mediation will fail, or when the prescribed or agreed time for mediation has expired and no settlement has been reached.” [Emphasis added.] The mediator said he could only move to resolve or fail, so on that basis, as found by the Arbitrator, the Insurer agreed to fail the mediation. (The Arbitrator ultimately found the Insurer was not bound by this agreement because it was forced into it.)
Subsection 280(8) provides that if mediation fails, the mediator shall prepare and give to the parties a report. The mediator provided his report of failed mediation on August 23, 2013. The report “confirms that the prescribed or agreed time for mediation of the issues in dispute has expired, no settlement has been reached and mediation has failed.” It then sets out the issues in dispute, as required by s. 280(8).
The Application for Arbitration was filed on October 9, 2013, within 90 days after the report.
Other than not attending the mediation, Ms. Pararajasingam had done everything necessary to file for arbitration: The parties agreed to extend the time for mediation, that time passed without a settlement, the Mediator issued his report consistent with s. 280(8), and Ms. Pararajasingam filed for arbitration within the limitation period of s. 281.1(2)(b).
However, the Arbitrator found that because Ms. Pararajasingam did not attend the mediation, the Mediator should have exercised a third option available under Rule 17.3(b) of the Code, namely “report to the parties that mediation did not take place” because Ms. Pararajasingam did not live up to her “obligation to participate in the mediation.”
The Arbitrator noted that s. 280(4) requires the mediator to enquire into and attempt to settle the issues in dispute “within the time prescribed in the regulations for the settlement of the type of dispute in question,” which time can be extended, as already noted.
The Arbitrator relied on Couraud and Co-operators General Insurance Company, (OIC A‑006346, October 31, 1994) for the proposition that the mediator’s opinion determines when mediation fails. The Arbitrator found that, since Ms. Pararajasingam was absent and there could be no discussion on settlement, there was no evidence to conclude that the Mediator had an opinion that the mediation would fail.
The Arbitrator found that since an inquiry and an attempt to settle had not occurred, the mediation did not “fail” but simply did not take place, so the Mediator should have reported that to the parties, pursuant to Rule 17.3(b).
In doing so, the Arbitrator distinguished Cornie, referred to above, and the similar Leone cases3 based on a different set of facts. Cornie held that all that is required to proceed to arbitration is that mediation has been sought and mediation has failed, and one of the ways in which mediation can fail is that the 60 days prescribed for mediation expire.
The Arbitrator also found that not attending the mediation is not compliant with the requirements of s. 281(2) of the Insurance Act, and referred to Amorini v. Select Coffee Roasters Inc., 2001 CanLII 62759 (ON SC), [2001] O.J. No. 581, noting that “the court was found to have no jurisdiction to hear a case as no mediation had occurred. The court concluded that failure to mediate was not imperfect compliance, it was non-compliance which denied relief against forfeiture under s. 129 of the Insurance Act.”
The Arbitrator concluded that the parties to a mediation have an obligation to participate in the process in good faith, and allowing an Applicant to by-pass the mediation process by not attending the mediation would be an abuse of process. Therefore, as mediation had not occurred, there was no valid Report of Mediator, and since the time limit had now expired, Ms. Pararajasingam was precluded from proceeding to arbitration.
III. ANALYSIS
To provide context, I will go through the steps in mediation. The first is to apply for mediation because s. 281(2) of the Act prevents insured persons from commencing arbitration regarding disputes about accident benefits “unless mediation was sought [and] mediation failed.” The mediation process itself is set out in s. 280 of the Act; the related rules are in Part 2 of the Dispute Resolution Practice Code, (Fourth Edition — Updated January 2014).
Subsections 280(1) through (3) establish that either party can seek mediation by filing an application for the prompt appointment of a mediator.
The role of the mediator and the importance of his or her opinion about the failure of mediation are set out in subsections 280(4) to (7). Subsection 280(4) states: “The mediator shall enquire into the issues in dispute and attempt to effect a settlement of as many of the issues as possible within the time prescribed in the regulations for the settlement of the type of dispute in question.” Subsection 280(5) provides for the extension of the prescribed time at any time: “The parties may by agreement extend the time for the completion of the mediation process, even if the time for completion has expired.” Subsection 280(6) provides: “If at any time before a settlement is effected the mediator is of the opinion that mediation will fail, he or she shall forthwith notify the parties.”
That brings us to the key provision of s. 280(7):
Mediation has failed when the mediator has given notice to the parties that in his or her opinion mediation will fail, or when the prescribed or agreed time for mediation has expired and no settlement has been reached. [Emphasis added.]
I find that the Arbitrator erred in distinguishing Cornie and in relying on Couraud. The heart of the decision in Couraud is the statement that “it is the opinion of the mediator which is crucial in determining when and whether a mediation has failed.” However, Cornie stated that the opinion of the mediator is irrelevant once the time for completion of mediation has passed. The Court held that “section [281(2)] does not require that a person await the receipt of a mediator’s report before commencing a proceeding. All that is required is that mediation has been sought and mediation has failed. I reiterate that s. 280(7) provides that one of the ways in which mediation can fail is that the 60 days prescribed for mediation expire.”
I find that the above subsections provide that the role of the Mediator is, indeed, to attempt to settle the issues within the prescribed or agreed time for mediation. Mediation fails when the mediator is of the opinion that mediation will fail and has given notice of that opinion, or “the prescribed or agreed time for mediation has expired and no settlement has been reached.”
Cornie dealt specifically with the prescribed time, but I see no reason why the agreed time would be treated any differently: that is, the mediator’s opinion is not crucial to determining when mediation has failed once the agreed time for completion of mediation has passed.
Further, if mediation fails, the mediator prepares the report required in s. 280(8) setting out the issues that remain in dispute. In this case, the mediator reported that the agreed time for mediation had expired, no settlement had been reached, and the issues listed remained in dispute.
Accordingly, because I find no difference in law between Cornie and this case , I find the Arbitrator erred in distinguishing Cornie.
With respect to Couraud, on which the Arbitrator relied: insured and counsel attended at mediation for five minutes and left. The Report of Mediator stated that mediation did not take place. The insurer was successful in its motion to prevent the insured from proceeding to arbitration on the basis that mediation had not failed. Senior Arbitrator Rotter stated that “The Act clearly specifies that it is the opinion of the mediator which is crucial in determining when and whether a mediation has failed.” Since the mediator found that mediation had not taken place, the condition precedent to proceeding to arbitration was not met.
In view of that statement, Arbitrator Reilly wrote:
I find the Couraud case persuasive on this point and based on the facts and the Applicant’s failure to participate in the mediation process, this precluded the Mediator from inquiring into the issues in dispute, attempting to effect a settlement and consequently, the Mediator could not form an opinion that mediation would fail. On this basis I also find that the statement in the failed Report of Mediator that the issues were [un]resolved was incorrect and not supported by the facts as they occurred.
The Mediator is to inquire into the issues and try to effect a settlement. There is no evidence that this occurred.
The Arbitrator went on to find that, since Ms. Pararajasingam was absent and there could be no discussion on settlement, there was no evidence to conclude that the Mediator had an opinion that the mediation would fail.
However, the Arbitrator’s focus on the Mediator’s opinion or lack thereof is misplaced, given that the mediator’s efforts at settlement and opinion about its failure is only relevant until the time for mediation expires. Further, I see no basis for the Arbitrator’s statement that the Report of Mediator was incorrect and unsupported by facts when it stated the issues were unresolved.4
As set out in Cornie, FSCO historically had not considered an application for mediation “filed” for the purpose of the time limit of 60 days until it deemed it filed. However, the Court of Appeal held that the 60-day clock ran from the time the application was delivered to FSCO and not whenever FSCO deemed it so. Accordingly, once that period had run, then the insured could request a report of failed mediation. The plaintiffs in that case had filed their statements of claims after the 60 days passed without waiting for the completion of mediation.
The Arbitrator found that the Leone and the Cornie cases are distinguishable from the case at hand because:
the facts in this case are more closely aligned to the Couraud case. The non-attendance by the Applicant at both scheduled dates for mediation which were scheduled on consent of both parties well past the 60 days for mediation is crucial and a determinative factor. Unlike the Cornie and Leone case, the Applicant was not present and the time for mediation had been extended on consent. Further, in Cornie, the activity of the regulator resulted in the mediation not being scheduled. In our case, the mediation was scheduled but the Applicant failed to attend. These two cases are distinguishable as there are two different sets of facts and as such not applicable to the case at hand.
I accept the Insurer’s position that based on Couraud, the Mediator must make inquiries and attempt to settle as many of the disputed issues as possible. As stated by the Insurer this never occurred in this case as the participant was not present. I concur the mediation did not “fail.” It did not take place.
I find the Arbitrator erred in distinguishing Cornie. She relied on the non-attendance of the Applicant, but there was no attendance by the insureds in Cornie or Leone either. I am also not persuaded that the difference in facts is relevant to an analysis of s. 280(7). The part of s. 280(7) that the Court relied on simply states that mediation has failed “when the prescribed or agreed time for mediation has expired and no settlement has been reached.” I find that, once either time has passed, all the elements related to the mediator’s role in trying to settle and in forming an opinion are irrelevant. Therefore, the Arbitrator incorrectly focused on the lack of the mediator’s opinion that mediation would fail, when no such opinion was necessary, as mediation had already failed due to the passage of time.
It follows that the Arbitrator erred when she found that since an inquiry and an attempt to settle had not occurred, the mediation did not “fail” but simply did not take place, so the Mediator should have reported that to the parties, pursuant to Rule 17.3(b). The mediation had indeed failed.
I find the Arbitrator also erred in relying on the Amorini v. Select Coffee Roasters Inc., 2001 CanLII 62759 (ON SC), [2001] O.J. No. 581 case. There, the plaintiff had not even filed for mediation. That is not what happened here, so it is not relevant.
State Farm submits that to extend the holding in Cornie to the present case in order to find that mediation had “failed” under s. 280(7) because the “agreed time” for mediation had expired, without settlement reached would undermine the statutory objective of making mediation mandatory, timely and effective. However, I find that Cornie rejected that kind of purposive analysis in the face of the clear language of the statute. I find that treating the lapsing of the prescribed and of the agreed time identically is consistent with FSCO’s approach to mediation after Cormie. By 2013, insureds could entirely bypass mediation once the prescribed time had passed by requesting a Report of Failed Mediation. And FSCO also published a Consent to Fail Mediation Form where both sides could jointly request FSCO to fail the mediation even before the time for mediation had passed. In that light, I find State Farm’s submission regarding the mandatory, timely and effective nature of mediation has little force.
State Farm also submits that the duty is to “seek” mediation, in that arbitration cannot be brought until mediation was sought and failed, so seeking mediation has to mean something more than simply filing for mediation. However, that is all that the Act requires. Subsection 280(2) provides that “The party seeking mediation shall file an application for the appointment of a mediator with the Commission.” Subsection 281(2) then says that “No person may … refer the issues in dispute to an arbitrator under section 282 … unless mediation was sought [and] mediation failed.” Reading these two subsections together, a person seeks mediation by filing for it, and can proceed to arbitration once it fails. One of the ways it can fail is if the agreed time expires, as happened here. The time expired, there was no settlement, and the Report of Mediator accurately set out what happened. This entitled Ms. Pararajasingam to refer the issues in dispute to arbitration within the 90 days.
The Arbitrator therefore erred in dismissing Ms. Pararajasingam’s Application for Arbitration. It was not barred under s. 281.1(1) and 281(2) of the Act, as Ms. Pararajasingam applied for mediation, mediation failed, and she applied for arbitration within 90 days of the Report of Mediator.
The appeal is therefore allowed.
IV. EXPENSES
If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.
February 2, 2017
David Evans Director’s Delegate
Date
Footnotes
- Effective September 1, 2010, the Statutory Accident Benefits Schedule – Effective September 1, 2010 (the “new SABS”) came into force. The transition rules in the new SABS provide that, subject to certain exceptions, benefits that would have been available pursuant to the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996 (the “old SABS”) shall be paid under the new SABS, but in amounts determined under the old SABS. As a result, both the old SABS and the new SABS are applicable to accidents that occurred on or after November 1, 1996 and before September 1, 2010 and both should be considered.
- Automobile Insurance Regulations, R.R.O. 1990, Reg. 644, s. 10.
- Leone and State Farm Mutual Automobile Insurance Company, (FSCO A11-002196, February 10, 2012), upheld on appeal (FSCO P12-00004, July 31, 2012).
- A typographical error in the decision states the Report says the issues were resolved.